Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Major Changes Seen in Warren Buffett and Berkshire Hathaway Stocks

Berkshire Hathaway Inc. (NYSE: BRK-A) has released its public equity holdings as of June 30, 2016. What makes this so interesting for Warren Buffett fans, outside of Buffett being one of the richest men alive, is that there have been many key changes in the Buffett stocks over the last few quarters. The Berkshire Hathaway earnings report in recent weeks showed that the total equity securities listed on the balance sheet was $102.563 billion, while the 13F filing with the SEC showed the balance as of June 30 as being $129.7 billion.

24/7 Wall St. and its founders have followed the portfolio changes from Buffett’s top stock holdings for about two decades now. We track the changes made each quarter, and ultimately these end up being quite different through time. Buffett’s addition of two more portfolio managers in recent years only makes the changes look even more extreme over time.

Investors need to keep in mind that approximately 61% of the aggregate fair value of the common equity securities is concentrated in four companies:

Wells Fargo & Co. (NYSE: WFC) at $23.7 billion;

International Business Machines Corp. (NYSE: IBM) at $12.3 billion;

The Coca-Cola Company at $18.1 billion; and

American Express Co. (NYSE: AXP) at $9.2 billion.

Again, big changes have been made. Warren Buffett also has large stakes in food-giant Kraft Heinz Co. (NYSE: KHC) and refining giant Phillips 66 (NYSE: PSX); and the March quarter showed a new $1 billion stake in Apple Inc. (NASDAQ: AAPL). Berkshire Hathaway also ended the June-2016 quarter with almost $72.7 billion in cash and cash equivalents. That figure is from a total of insurance and other, railroad utilities and energy, and finance and financial products.

Here is how the new list of Warren Buffett and Berkshire Hathaway’s public share holding looks as of June 30, 2016.

American Express Co. (NYSE: AXP) was the same 151.6+ million shares, a position which remains perpetually static whether shares rise or fall. Buffett has owned AmEx for so long it may be cheaper for him to just hold rather than pay gains.

The Coca-Cola Company (NYSE: KO) was the exact same stake of 400 million shares, a position which has also remained static for years. Buffett has defended his stake here for years.

International Business Machines Corp. (NYSE: IBM) was listed as the same 81.232 million shares in June as it was in March. Still, this Big Blue stake has been raised and raised. It was 81.03 million shares as of December 31, about 79.5 million shares as of the end of last June, and the end of 2014 position was 76.971 million IBM shares.

Wells Fargo & Co. (NYSE: WFC) is a position that Warren Buffett might add to for infinity. The June 30 stake was listed as the same 479.704 million shares listed in March. This was 470.29 million shares last September, and again it just keeps being raised. As a reminder, it was documented that Buffett has filed to be allowed to increase his stake north of the 10% threshold with the SEC. With Wells Fargo being a serial acquirer of its own stock Buffett might end up owning more than 10% of the stock even without trying.

Kraft Heinz Co. (NYSE: KHC) was listed as 325,634,818 shares, the same stake it was on March 31 and at the end of 2015. This stake is from the 3G Capital deal and is actually more important than it seems. Buffett had been suggesting that his exposure would be coming down due to his preferred shares being redeemed. The earnings report in recent weeks confirmed that. The value here as of June 30 was $28.8 billion.

Phillips 66 (NYSE: PSX) was an INCREASED STAKE to 78.782 million shares as of June 30. As of March 31, it was a 75.55 million share stake and this has risen steadily. This stake previously had been classified as an elimination in 2015 and then was shown after Buffett got the stake classified with the SEC as confidential.

Apple Inc. (NASDAQ: AAPL) was an INCREASED STAKE to 15.227 million shares as of June 30, worth some $1.455 billion. The stake in Apple was a new position back in the March quarter, listed as 9,811,747 shares worth some $1.069 billion at that time.

Axalta Coating Systems Ltd. (NYSE: AXTA) was the same stake of 23.324 million shares, after having been listed as a new position of 20 million shares.

Bank of New York Mellon Corp. (NYSE: BK) was a larger stake at 20.827 million shares, up from a prior 20.112 million. That was versus 24.6 million shares in the past.

Charter Communications Inc. (NASDAQ: CHTR) was a slightly lower stake at 9.337 million shares. This was 10.326 million shares in March but was up then from 10.281 million at the end of 2015.

Costco Wholesale Corp. (NASDAQ: COST) was the same stake at 4,333,363 shares.

DaVita Inc. (NYSE: DVA) was the same 38.565 million shares, but this had been raised in prior quarters prior to Buffett entering into a standstill agreement not to buy more than 25% of the company.

Deere & Co. (NYSE: DE) was a smaller stake at 21.959 million shares. That is down from 23.28 million shares, but that had been 22.884 million shares at the end of 2015 after some 5.83 million shares had been added at the end of last year.

General Electric Corp. (NYSE: GE) was the same stake of 10.585 million shares. This stake was raised in 2014 and had been telegraphed before because of the warrants.

General Motors Co. (NYSE: GM) was a the same stake of exactly 50 million shares, but this previously had been raised from 41 million shares last year.

Goldman Sachs Group Inc. (NYSE: GS) was the same stake of 10.959 million shares, but this had been as high as 12.631 million shares prior to the end of 2015.

Graham Holdings Co. (NYSE: GHC) remains the same tiny stake of 107,575 shares in what is just the remains of Washington Post breakup.

Johnson & Johnson (NYSE: JNJ) was the same tiny stake of only 327,100 shares, but Buffett watchers know this is a leftover bit from a much larger stake in years past.

Kinder Morgan Inc. (NYSE: KMI) was listed as 26.533 million shares as of June 30. This was the same stake as in March and was selected by one of Buffett’s portfolio managers rather than on his own.

Lee Enterprises Inc. (NYSE: LEE) was the same tiny stake of only 88,863 shares.

Liberty Media Corp. (NASDAQ: LMCA) and Liberty Global PLC (NASDAQ: LBTYA) are both again listed as Buffett and Berkshire Holdings. These are counted as Class A and Class C shares, so we will leave this stakes simplified just like that.

M&T Bank Corp. (NYSE: MTB) was the same position at 5.382 million shares — same as always.

MasterCard Inc. (NYSE: MA) was the same 4.934 million shares as in March, but this was 5,229,756 shares at the end of 2015.

Media General Inc. (NYSE: MEG) was the same-sized stake at 3.471 million shares.

Mondelez International Inc. (NASDAQ: MDLZ) is the same position again at 578,000 shares, remaining handily lower than in the past and dating back to the Kraft breakup.

Moody’s Corp. (NYSE: MCO) was the same position of 24.669 million shares yet again, but this stake is still lower than in years past.

NOW Inc. (NYSE: DNOW) was the same stake of 1.825 million shares.

Procter & Gamble Co. (NYSE: PG) is still a much lower stake of just 315,400 shares, same as in March. This had previously been listed as almost 52.8 million shares in the prior formal 13F report before the Duracell swap. P&G had once peaked at 96.3 million shares in the Buffett stocks.

Restaurant Brands International Inc. (NYSE: QSR) was the same stake at 8.438 million shares. The reality is that this is much larger if you consider the $3 billion in perpetual preferred shares pointed out previously.

Sanofi (NYSE: SNY) was the same position at 3.905 million shares.

Suncor Energy Inc. (NYSE: SU) was a lower stake at 22.275 million shares. This had been up to 30 million shares previously, but this used to be a smaller stake at 22.35 million last June.

Torchmark Corp. (NYSE: TMK) the same stake at 6.353 million shares.

Twenty-First Century Fox Inc. (NASDAQ: FOXA) was the same stake of 8.951 million shares at the end of 2015. This stake was raised from 6.228 million shares in prior reports, versus 4.747 million shares at the end of 2014.

U.S. Bancorp (NYSE: USB) was the same position of 85.06 million shares at the end of June but that stake had been raised slightly before the prior quarters (was 80.09 million shares at the end of 2014).

USG Corp. (NYSE: USG) was the same stake at just over 39.002 million shares, but this had been raised prior to the end of 2014.

United Parcel Service Inc. (NYSE: UPS) was the same position of just 59,400 shares, way down from 2012.

VeriSign Inc. (NASDAQ: VRSN) was slightly smaller at 12.952 million shares, after having had been a tad larger at 13.044 million shares in March. This one had previously grown in 2014.

Verisk Analytics Inc. (NASDAQ: VRSK) was the same position at 1,563,434 shares, but that is lower than in prior quarters.

Verizon Communications Inc. (NYSE: VZ) was the same stake at 15 million shares in June versus the end of March, but that had been raised a year earlier.

Visa Inc. (NYSE: V) was the same stake of 10.239 million shares at the end June, but this is up from 9.885 million shares in 2015. The Visa stake had been raised throughout 2014.

WABCO Holdings Inc. (NYSE: WBC) was the same 3.237 million shares, but this had been coming down through time. At one point the stake was over 4 million shares.

Wal-Mart Stores Inc. (NYSE: WMT) was a stake was taken down by more than 15 million shares to 40.226 million by the end of June. That was decreased by 949,430 in March to some 55,235,863 shares. That stake was 56.185 million shares at the end of 2015 and was down from 60.385 million shares at the end of June and after having been raised prior to 2015.

Value of an Asset

From The Essays of Warren Buffett: “In Theory of Investment Value, written over 50 years ago, John Burr Williams set forth the equation for value, which we condense here: The value of any stock, bond or business today is determined by the cash inflows and outflows—discounted at an appropriate interest rate—that can be expected to occur during the lifetime of the asset.”

Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.

Always buy a lot when the price is low.

Never buy when the stock is overpriced.

It is alright to buy when the selected stock is at a fair price.

Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.

Do not time the market for such or any stocks.

By keeping to the above strategy, the returns will be delivered through the growth of the company's business.

So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.

The downside risk is protected through only buying when the price is low or fairly priced.

Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.

Sell urgently when the company business fundamental has deteriorated irreversibly.

You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.

In conclusion, a critical key to successful investing is in your stock picking ability.

My Philosophy and Strategy

DOCUMENTRY- WARREN BUFFETT THE WORLDS GREATEST MONEY MAKER

Peter Lynch

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.2. Never invest in any idea you can’t illustrate with a crayon.3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.5. Time is on your side when you own shares of superior companies.6. Owning stock is like having children. Don’t get involved with more than you can handle.7. When the insiders are buying, it’s a good sign.8. Unless you’re a short seller, it never pays to be pessimistic.9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Think of your physical, mental and social well-being. Money may not buy happiness.

What is Risk?

The major RISK facing you is the possibility of not reaching your long-term investment goal through the growth of your funds in real terms. And the greatest enemy of reaching those goals is INFLATION. Nothing is safe from inflation. Short-term price volatility is NOT risk for investors who have time horizons 5, 10, 15 or 30 years away. Volatility is the friend of the long term investor. The most important friends of your investment goal are COMPOUNDING and TIME.

Life Cycle of A Successful Company

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:- fixed assets such as equipment, property, or industrial buildings- fixing problems with an asset- preparing an asset to be used in business- restoring property- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

The best stock investment strategy

Keep it simple. Keep it safe (make money with less risk taking). You don't need to pick the best stock or even the best stock funds to do well, if you have an investment strategy that keeps you out of trouble.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

Visualization Video for a New Life

All equity security investments present a risk of loss of capital

Investment performance is not guaranteed and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns. The results of your investing will be affected by a number of factors, including the performance of the investment markets in which you invest.

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.• A balance sheet with less debt than other companies in its particular industry.• A P/E ratio no higher than average.• A dividend yield that suits your particular needs.• A below-average dividend pay-out ratio.• A history of earnings and dividends not pockmarked by erratic ups and downs.• Companies whose ROE is 15 or better.• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Benjamin Graham

"To achieve satisfactory investment results is easier than most people realise; to achieve superior results is harder than it looks."

Sell the losers, let the winners run.

Losers refer NOT to those stocks with the depressed prices but to those whose revenues and earnings aren't capable of growing adequately. Weed out these losers and reinvest the cash into other stocks with better revenues and earnings potential for higher returns.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments.If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

Market Fluctuations of Investor's Portfolio

Note carefully what Graham is saying here. It is not just possible, but probable, that most of the stocks you own will gain at least 50% from their lowest price and lose at least 33%("equivalent one-third") from their highest price -regardless of which stocks you own or whether the market as a whole goes up or down.If you can't live with that - or you think your portfolio is somehow magically exempt from it - then you are not yet entitled to call yourself an investor.